Thought Leader Presented by Partner Engineering & Science, Inc.
Five Changes to Radon Requirements for Fannie & Freddie MF Loans
As the effective date draws closer, multifamily lenders and borrowers should get familiar with FHFA's updated radon sampling requirements.
Agency lenders are preparing to implement the new radon testing standards for Fannie Mae and Freddie Mac multifamily loans. The updated policy applies to loan applications received on or after June 30, 2023. Read the Federal Housing Finance Agency’s (FHFA) January announcement regarding the increased sampling requirements here.
Summary of Changes for Fannie Mae and Freddie Mac Seller/Servicers
There are five main changes in the FHFAs updated radon testing policy:
- Requires radon testing at multifamily Enterprise-backed properties, regardless of property location, subject to some exemptions and deferrals.
- Increases required testing from 10% of ground floor units to 25% of ground floor units, with no fewer than one test per building.
- Allows no more than 15% lost, faulty, inaccessible tests or environmental professional discretion.
- Requires the environmental professional or property representative to provide tenant notifications of radon testing (access, sampling condition requirements, etc.)
- Provides additional guidance for lenders and environmental consultants on the Enterprises’ radon standards. As part of such guidance, the Enterprises will reinforce the need for compliance with state and local radon laws.
Note that the updated policy continues to allow an environmental professional to manage the radon testing process.
Loans/Areas Not Subject to Testing
- Refinances of properties with existing Enterprise debt that have undergone previous radon testing and mitigation (if applicable) compliant with this policy.
- Supplemental loans
- Cooperatives
- Manufactured Housing Communities
- Properties with no ground-contact residential units (including properties with ground-floor retail, first-floor amenities/leasing, or residential units above parking garage or over code-compliant ventilated crawl space)
- Upper-floor residential units
- Any improvements that are not part of the collateral
- Properties with property-wide radon mitigation systems and Operations and Maintenance (O&M) plans in place
- New construction built with radon resistant measures
- When the EP concludes that testing or mitigation is not necessary and documents reasons supporting this conclusion.
- Small loans/Small Balance Loan (SBL) mortgages (deferred from testing until 2024, when it will be reassessed).
Choosing A Qualified Radon Testing Consultant
In addition to the updated standards issued by FHFA, state regulations and license requirements apply. Tracking and applying the various state regulations adds complexity to the testing process. Lenders should verify that their due diligence provider has a complete understanding of federal and state radon regulations, as well as EPA’s ANSI/AARST standards for all building types. In addition to appropriately experienced and licensed technicians, qualified due diligence providers should also be experienced with reporting templates and standards for Freddie Mac and Fannie Mae.
Upcoming Radon Webinar Offers Q&A with Experts
On June 8, Partner Engineering and Science, Inc., is hosting a webinar entitled “New Radon Sampling Regulations for Fannie & Freddie” featuring a panel of experts with extensive experience in radon testing and due diligence requirements for Fannie Mae and Freddie Mac loans. To learn more about the new radon requirements or ask a question of one of our experts, please register for the webinar here.
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